How blockchain technology is changing the real estate industry
Blockchain platform technology can be applied to numerous aspects of real estate business. Here are a few worth noting:
Nick Clare, Head of Project Management, JLL UK, says that blockchain has the ability to "create, authenticate and audit contracts in real-time, across the world and without intervention from a middle man…[and] have instructions rooted in the transaction so that payment can only be taken as long as the instructions are fulfilled, providing complete transparency to all parties and reducing the likelihood of payment disputes."
Smart real estate contracts enabled by blockchain will not only speed up the leasing process and save on costs, but it can also improve due diligence. Blockchain would have the ability to verify identities and incomes, and reduce the likelihood of fraud.
The entire real estate transaction process can be held on the blockchain. The submission of an offer, verification of title, the acceptance and verification of that offer, the due diligence process, the financing, and closing can all be verified and codified within a digital ledger. The use of blockchain for real estate transactions has significant implications for real estate agent and broker jobs.
Credit checks, income and identity verification, debt to income ratios, and so much more can be held on and verified using blockchain. The mortgage financing process is fraught with friction and frustration. If all your critical documents are held on blockchain, no longer do you need to scramble to get dozens of different documents to your bank or broker.
Traditionally kept offline, blockchain tech has the ability to store and verify these critical legal real estate documents. Imagine if you could log into a blockchain land registry to verify title ownership of any plot of land in your area.
Identity verification and contracting signing can be facilitated and held on a blockchain. Whether it’s income verification of the tenant, employer checks, or other references, this can all be facilitated and held on a digital ledger.
If an asset becomes tokenized to 1,000 investors instead of 10, you automatically increase the liquidity of that real estate investment. If buyers and sellers of tokens are more easily able to sell and buy shares in a particular asset, then exit strategies and liquidity problems drop significantly.
A real estate blockchain can be used as a single source of truth to verify ownership of assets. This includes fractional ownership through a token, and all the owners of those tokens will be publicly available.
Bottom line: Future of blockchain in real estate
Blockchain has significant implications for the real estate industry. It could eliminate the need for middlemen in transactions, improve trust among transactors, act as record-keeper, speed up all contracts, leases, and transactions, improve liquidity, reduce fraud, and reduce costs and fees. This is a major disruption, but much of this innovation is presently theoretical.
Although some real-world examples of blockchain exist, we are some time away from executing on the full promise of blockchain in real estate. Investors should take all of the above into consideration and start thinking about ways to expose themselves to these forthcoming innovations in the real estate industry.